Weekly Market Update: 25 - 29 September

Last week

On Monday the carbon market opened near the 20MA which was at 6.65 €. The December contract had a daily 66 cents move mainly due to the stronger power price as the output of renewables in Germany was considerable and supported by the buying activity in the crude oil market. The day closed right under the projection of the trend channel line at 7.28 € slightly retrieving from the daily high at 7.36 €.

 

On Tuesday, rather unexpectedly, the gains were erased by more than 60% and the day settled in the lows. The carbon price went down to 6.88 €.  The EUA auction though closed at 6.97 €, higher than previous day and with a high bid cover ratio close to 3. Carbon fell steeply in early trade but stabilized around €7/t after meeting technical support.

 

On Wednesday, the forward power prices fell for the second session running in line with declines in coal and carbon prices, which represent important input costs for generators: December carbon contract lost 3.3% during the day, while coal CIF Europe for 2018 delivery slid 1.2 % to $81.50/t. On the other side, the French nuclear power availability rose by 2% to just under 70%. During the weakest day of the week for the carbon price, with a high at 6.98 €, the Polish auction closed at 6.75 €/t close to the daily low of 6.72 €. The carbon price tested the Monday’s low but received support by 20MA on a daily graph.

 

On Thursday, the EU sold 4.262 M EUA at 6.83 €. The trading session went under the sign of „no direction, but volatility“. The 7 € resistance level was tested and largely broken with a high of 7.33 € but the session ended again below 7 € for a third consecutive day. This downturn was largely explained by the fell of the European spot power prices on increasing renewable and nuclear power output. French nuclear output has gained 3 % points to 71 % of capacity. At the end of the day, French and some German forward prices gained sharply on news that Tricastin must shut until early November, at a time when demand is rising as the cold season approaches.

 On Friday, Germany sold 4.473 M EUAs at 7.09 €. One more rejection on the move up came, but still supported by 20MA. French prices rose, factoring in the surprise closure of the Tricastin nuclear plant from October. The plant, asked by regulator ASN to upgrade safety due to flooding risks, has four units of 900 megawatts (MW) each. German utility RWE said it would take offline its Frimmersdorf P and Q brown coal-fired power-generation units from Oct. 1, as agreed under a national brown coal reserve scheme in 2015. The blocks have 300 MW capacity each.

Key news

French president Emmanuel Macron calls for significant minimum carbon price. During his speech at the Sorbonne University, the president said that the current levels are too low to help the transition into low-carbon economy. He added that Europe should impose a border carbon tax to protect industry from countries, which don`t have such policies. His comments seem to be accepted positive by the market, where DEC-17 EUA prices increased by 4% above 7 euros after the speach.

News for the aviation operators: Last Wednesday, September 27, EU sold 1 078 000 EUAAs for 6.71 EUR on the German exchange EEX. The price was 0.17 EUR lower than the EUA price on the secondary market at the time the bidding window closed. Six bidders out of seven were successful. The next aviation auction will be held by UK on October 11 for 725 500 EUAAs. A total volume of 4.73 million EUAAs have to be sold in 2017. No aviation allowances from EEA-EFTA countries are included in that total. They will sell 1.3 million EUAAs at a later stage.

Switzerland and EU to link their emissions trading systems. Until an agreement is found and enters into force, the two systems will run in parallel and the aviation operators have to deal with both the local authorities – the Swiss Federal Office for the Environment (FOEN) and the current competent authority for EU ETS. The deadline for reporting the first data for international and domestic flights was the end of September. The operators have to monitor the qualifying flights in 2018 and submit information by March 31 2019. This information will serve as a basis for calculating the free allocation and to determine the emissions cap.

Estonia earned 23.5 million EUR by the sale of auctioned EUAs in 2016.  The revenue will be used to improve the energy efficiency and reduce the maintenance cost in the public sector. The projects were launched this summer and plan to finish by the end of 2019. The total revenue of the country since the beginning of the phase in 2013, is more than 70 million EUR.

 

Market Data

 

EUA DEC-17:

Date

Open

High

Low

Last

25.09.2017

6.7

7.36

6.67

7.28

26.09.2017

7.3

7.36

6.88

 6.98

27.09.2017

6.95

6.98

6.72

6.91

28.09.2017

6.95

7.33

6.78

6.96

29.09.2017

6.87

7.29

6.87

7.06

 

EUA AUCTIONS:

 

Date

Country

Price

Volume

Ratio

25.09.2017

EU

6.80

4 261 500

   2.29

 

26.09.2017

EU             

6.97

4 261 500

2.95

 

27.09.2017

PL

6.75

4 857 000

2.90

 

28.09.2017

EU

6.83

4 261 500

2.63

 

29.09.2017

DE

     7.09

4 473 000

    2.68

 

                   

 

EUAA AUCTIONS:

 

Date

Country

Price

Volume

Ratio

27.09.2017

EU

6.71

1 078 000

   2.67

 

                 

 

 

Boyan Boev

bboev@sagacommodities.com

 

Nevena Petrova

npetrova@sagacommodities.com